Labor mulls supporting Coalition income tax cuts

There is an emerging view within federal Labor that it should pass the Coalition's income tax cuts when they are presented to the Parliament next month.

With the party directionless and leaderless, it has no capacity to make a decision at the moment on the $158 billion, three-stage tax cuts, which were in the April 2 budget and which the government will put to Parliament as a priority next month.

At the April 2 budget this year, the government boosted the tax cuts by another $158 billion. By 2024, the three-stage package will culminate in incomes between $45,000 and $200,000 being taxed at a flat rate of 30 per cent.

Labor went to the election opposing stages two and three, which begin on July 1, 2022, and July 1, 2024 respectively, on the basis they were very expensive and should not be locked into the budget at this stage when the economic outlook was so uncertain.

Advertisement

Labor said, if elected, it would look at further tax relief at the time, when it would be known whether it was affordable.

But following Saturday's shock election loss, some in the party say it should wave through the legislation, which will tie the three stages together.

'We should be making the decision collectively'

One senior MP said the tax cuts were a "poison pill for the budget" and if there was an economic downturn, life could become very uncomfortable for the government in a couple of years if it had to deliver the cuts and try and keep the budget in surplus.

But he also reasoned that Labor went to the election demanding its mandate be respected and, in that sense, it should respect the Coalition's mandate.

Another senior MP who was previously opposed to legislating the tax cuts was also open to the prospect but the decision would have to be made collectively by the caucus.

"Labor's strength over recent years has been good process,'' he said.

"Particularly for a big decision like that. We should be making the decision collectively, not on the run.''

Another frontbencher said the government would probably get the support of the Senate frontbench so there was no point in Labor opposing the cuts either.

Under its rules, if there is more than one candidate, there must be a 30-day process during which there is a ballot of the caucus and a ballot of the rank and file, each of which contributes 50 per cent of the result.

Bill Shorten will serve as interim leader during the process, meaning he may be in the chair when Parliament resumes.

Topics

Phillip Coorey is The Australian Financial Review's Political Editor based in Canberra. He is a two-time winner of the Paul Lyneham award for press gallery excellence. Connect with Phillip on Facebook and Twitter. Email Phillip at pcoorey@afr.com